UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
XX QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8159
BURLINGTON NORTHERN INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1400580
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3800 Continental Plaza, 777 Main St.
Fort Worth, Texas 76102-5384
(Address of principal executive offices) (Zip Code)
(817) 333-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding
Common stock, without par value
as of March 31, 1994 89,001,828 shares
<PAGE>
BURLINGTON NORTHERN INC. and SUBSIDIARIES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements . . . . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . 5
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders. . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 13
(i)
<PAGE>1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BURLINGTON NORTHERN INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Millions, Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
1994 1993
Revenues............................................... $1,210 $1,170
Costs and expenses:
Compensation and benefits............................ 447 441
Fuel................................................. 83 88
Materials............................................ 85 80
Equipment rents...................................... 102 92
Purchased services................................... 117 105
Depreciation......................................... 87 86
Other................................................ 107 110
Total costs and expenses........................... 1,028 1,002
Operating income....................................... 182 168
Interest expense....................................... 39 33
Other expense, net..................................... (1) (3)
Income before income taxes and cumulative effect of
change in accounting method.......................... 142 132
Income tax expense..................................... 55 50
Income before cumulative effect of change in accounting
method............................................... 87 82
Cumulative effect of change in accounting for
postemployment benefits, net of tax.................. (10) -
Net income............................................. $ 77 $ 82
Earnings (loss) per common share:
Income before cumulative effect of change in
accounting method.................................. $ .90 $ .86
Cumulative effect of change in accounting for
postemployment benefits............................ (.11) -
Earnings per common share.............................. $ .79 $ .86
Number of shares used in computation of earnings (loss)
per common share (in thousands)...................... 90,290 89,142
Dividends declared per common share.................... $ .30 $ .30
See accompanying notes to consolidated financial statements.
<PAGE>2
BURLINGTON NORTHERN INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Millions)
(Unaudited)
ASSETS March 31, December 31,
1994 1993
Current assets:
Cash and cash equivalents.................. $ 23 $ 17
Accounts receivable, net................... 590 589
Materials and supplies..................... 121 91
Current portion of deferred income taxes... 159 167
Other current assets....................... 98 27
Total current assets..................... 991 891
Property and equipment, net.................. 5,929 5,909
Other assets................................. 270 245
Total assets............................. $7,190 $7,045
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 513 $ 492
Casualty and environmental reserves........ 269 286
Compensation and benefits payable.......... 240 271
Taxes payable.............................. 140 123
Accrued interest........................... 51 44
Other current liabilities.................. 81 102
Current portion of long-term debt.......... 183 185
Commercial paper........................... 127 26
Total current liabilities................ 1,604 1,529
Long-term debt............................... 1,515 1,526
Deferred income taxes........................ 1,348 1,342
Casualty and environmental reserves.......... 427 426
Other liabilities............................ 319 303
Total liabilities........................ 5,213 5,126
Stockholders' equity:
Convertible preferred stock, no par value,
$345 liquidation value; 25,000,000 shares
authorized; 6,900,000 shares issued...... 337 337
Common stock, without par value, at stated
value, 300,000,000 shares authorized;
89,088,403 shares and 88,881,675 shares
issued, respectively..................... 1 1
Additional paid-in capital................. 1,431 1,420
Retained earnings.......................... 243 198
Treasury stock, at cost, 86,575 shares and
85,536 shares, respectively.............. (4) (4)
Other...................................... (31) (33)
Total stockholders' equity............... 1,977 1,919
Total liabilities and stockholders'
equity................................. $7,190 $7,045
See accompanying notes to consolidated financial statements.
<PAGE>3
BURLINGTON NORTHERN INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Millions)
(Unaudited)
Three Months Ended
March 31,
1994 1993
Cash flows from operating activities:
Net income....................................... $ 77 $ 82
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of change in accounting
method..................................... 10 -
Depreciation................................. 87 86
Deferred income taxes........................ 21 25
Changes in current assets and liabilities:
Accounts receivable, net................... (1) 10
Materials and supplies..................... (29) (20)
Other current assets....................... (71) (5)
Accounts payable........................... 21 (2)
Casualty and environmental reserves........ (17) (11)
Compensation and benefits payable.......... (29) (19)
Taxes payable.............................. 19 26
Accrued interest........................... 7 14
Other current liabilities.................. (21) (20)
Changes in long-term casualty and
environmental reserves..................... 1 6
Other, net................................... (26) (14)
Net cash provided by operating activities.......... 49 158
Cash flows from investing activities:
Additions to property and equipment.............. (104) (106)
Proceeds from property and equipment dispositions 5 8
Other, net....................................... (4) (5)
Net cash used in investing activities.............. (103) (103)
Cash flows from financing activities:
Net increase in commercial paper................. 101 -
Payments on long-term debt....................... (14) (35)
Dividends paid................................... (32) (29)
Proceeds from exercise of common stock options... 5 5
Net cash provided by (used in) financing activities 60 (59)
Increase (decrease) in cash and cash equivalents... 6 (4)
Cash and cash equivalents:
Beginning of period.............................. 17 57
End of period.................................... $ 23 $ 53
Supplemental cash flow information:
Interest paid.................................... $ (30) $ (26)
Income tax (paid) refund received, net........... (1) 1
See accompanying notes to consolidated financial statements.
<PAGE>4
BURLINGTON NORTHERN INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting policies
The 1993 Annual Report on Form 10-K for Burlington Northern Inc. (BNI) and
its majority-owned subsidiaries (collectively BN) includes a summary of
significant accounting policies and should be read in conjunction with
this Form 10-Q. The principal subsidiary is Burlington Northern Railroad
Company (Railroad). The statements for the periods presented are
condensed and do not contain all information required by generally
accepted accounting principles to be included in a full set of financial
statements. In the opinion of management, all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly BN's
financial position as of March 31, 1994 and December 31, 1993 and the
results of operations and cash flows for the three months ended March 31,
1994 and 1993 have been included. The results of operations for any
interim period are not necessarily indicative of the results of operations
to be expected for the entire year.
2. Other expense, net
Other income (expense), net includes the following (in millions):
Three Months Ended
March 31,
1994 1993
Gain on property dispositions............. $ 2 $ -
Interest income........................... 1 1
Loss on sale of receivables............... (2) (3)
Miscellaneous, net........................ (2) (1)
Total..................................... $ (1) $ (3)
3. Accounting change
Effective January 1, 1994, BN adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits."
The cumulative effect, net of $7 million income tax benefit, of this
change in accounting attributable to years prior to 1994, at the time of
adoption, was to decrease 1994 first quarter income by $10 million, or
$.11 per common share.
<PAGE>5
BURLINGTON NORTHERN INC. and SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's discussion and analysis relates to the financial condition and
results of operations of Burlington Northern Inc. (BNI) and its majority-owned
subsidiaries (collectively BN). The principal subsidiary is Burlington
Northern Railroad Company (Railroad).
Capital Resources and Liquidity
Cash from operations and other resources
Cash generated from operations is BN's primary source of liquidity and is
primarily used for dividends and capital expenditures. For the first three
months of 1994 cash provided by operating activities decreased $109 million
when compared with the first three months of 1993. This decrease was
primarily attributable to $53 million of assets purchased in 1994 which were
held in "Other current assets" pending final financing arrangements and an
increase of $14 million in incentive compensation paid. While current year
cash from operations was sufficient to fund dividends, it was not sufficient
to completely fund capital expenditures; therefore, the balance was financed
with debt. Other sources available for financing needs are discussed below.
In 1993 BN entered into an agreement to acquire 350 new-technology alternating
current traction motor locomotives. To date BN has accepted delivery of 29
locomotives and anticipates additional deliveries of approximately 80 units in
1994 as well as deliveries of between approximately 60 and 100 each year from
1995 through 1997. Future cash from operations during this strategic
investment period may not, at times, be sufficient to completely fund
dividends as well as capital expenditures and strategic investments.
Therefore, these requirements will likely be financed using a combination of
sources including, but not limited to, cash from operations, operating leases,
debt issuances and other miscellaneous sources. Each financing decision will
be based upon the most appropriate alternative available.
Railroad maintains an effective program for the issuance, from time to time,
of commercial paper. These borrowings are supported by Railroad's bank credit
agreement, thus outstanding commercial paper balances reduce available
borrowings under this agreement. The bank credit agreement allows borrowings
of up to $500 million on a short-term basis. At Railroad's option, borrowing
rates are based on prime, certificate of deposit or London Interbank Offered
rates. Annual facility fees are 0.25 percent. The agreement is currently
scheduled to expire in November 1994; however, Railroad is currently
negotiating two new agreements that would allow borrowings of up to $300
million on a short-term basis and $500 million on a long-term basis. The
maturity value of commercial paper outstanding at March 31, 1994 was $127
million, leaving a total of $373 million of the credit agreement available,
while $27 million of commercial paper was outstanding at December 31, 1993.
Railroad has an agreement to sell, on a revolving basis, an undivided
percentage ownership interest in a designated pool of accounts receivable with
limited recourse. As of March 31, 1994, the agreement allowed for the sale of
accounts receivable up to a maximum of $175 million. The agreement expires
not later than December 1994. At March 31, 1994 and December 31, 1993,
accounts receivable were each net of $100 million representing receivables
sold.
<PAGE>6
BURLINGTON NORTHERN INC. and SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
BNI continues to maintain an effective registration statement on Form S-3 with
the Securities and Exchange Commission covering the issuance from time to time
of up to $500 million aggregate principal amount of debt securities.
Capital expenditures and resources
A breakdown of capital expenditures is set forth in the following table (in
millions):
Three months ended March 31, 1994 1993
Road, roadway structures and real estate.......... $ 83 $ 66
Equipment......................................... 21 40
Total............................................. $104 $106
During the current year BN will continue to reinvest in its business through
capital expenditures; therefore, capital spending should remain at a level
comparable to 1993. In addition to the above capital expenditures, in the
first quarter of 1994 BN purchased $53 of assets which were held in "Other
current assets" pending final financing arrangements which may possibly
include a sale and lease-back. As discussed in "Cash from operations and
other resources," BN has a commitment to acquire 350 new-technology
alternating current traction motor locomotives through 1997. Also, BN will
continue its implementation of several strategic initiatives for
transportation network management using information systems technology.
In addition to capital expenditures, BN continues to utilize operating leases
to fulfill certain equipment requirements. Depending upon current market
conditions and other miscellaneous factors, a portion of the locomotives
discussed above may be obtained through operating leases rather than
purchases. In the first quarter of 1994, BN renewed leases for locomotives
and covered hoppers, while in the first quarter of 1993, renewals were
primarily for boxcars and covered hoppers.
Dividends
Common stock dividends declared for the first quarter of 1994 and 1993
remained constant at $.30 per common share. Dividends paid on common and
preferred stock were $32 million compared with $29 million during the prior
year's quarter. BNI expects to continue its current policy of paying regular
quarterly dividends on its common and preferred stock; however, dividends are
declared by the Board of Directors based on profitability, capital
expenditures requirements, debt service and other factors.
Capital structure
BN's ratio of total debt to total capital was 48 percent at March 31, 1994 and
December 31, 1993.
<PAGE>7
BURLINGTON NORTHERN INC. and SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three months ended March 31, 1994 compared with three months ended March 31,
1993
BN recorded net income of $77 million, or $.79 per common share, on 90.3
million shares for the first quarter of 1994 compared with net income of $82
million, or $.86 per common share, on 89.1 million shares for the same period
in 1993. Results for 1994 were reduced by a $10 million or $.11 per common
share, net of tax, cumulative effect of an accounting change for
postemployment benefits.
Revenues
The following table presents BN's revenue information by Railroad business
unit for the three months ended March 31:
<TABLE>
<CAPTION>
Revenues Per
Revenues Revenue Ton Miles Revenue Ton Mile
Three months ended March 31, 1994 1993 1994 1993 1994 1993
(In Millions) (In Millions) (In Cents)
<S> <C> <C> <C> <C> <C> <C>
Coal.............................. $ 418 $ 381 32,502 29,092 1.29 1.31
Agricultural Commodities.......... 196 217 7,964 10,408 2.46 2.08
Intermodal........................ 178 176 5,897 5,724 3.02 3.07
Forest Products................... 122 122 5,053 5,116 2.41 2.38
Chemicals......................... 99 99 3,522 3,633 2.81 2.73
Consumer Products................. 65 65 2,278 2,244 2.85 2.90
Minerals Processors............... 46 42 1,900 1,729 2.42 2.43
Iron & Steel...................... 40 42 1,985 1,925 2.02 2.18
Vehicles & Machinery.............. 47 45 628 572 7.48 7.87
Aluminum, Nonferrous Metals & Ores 26 27 999 1,015 2.60 2.66
Shortlines and other.............. (27) (46) (2,223) (3,064) - -
Total............................. $1,210 $1,170 60,505 58,394 2.00 2.00
</TABLE>
Total revenues for the first quarter of 1994 were $1,210 million compared with
$1,170 million for the same period in 1993. The $40 million increase was
primarily due to improved Coal revenues. Lower Agricultural Commodities
revenues were partially offset by reduced shortlines and other.
Coal revenues improved $37 million during the first quarter of 1994 as a
result of increased traffic. This increase was primarily caused by a rise in
the demand for electricity as well as the need for utilities to replenish coal
stockpiles which were partially depleted during the 1993 summer flooding.
Partially offsetting the increase in traffic was a decline in yields. Lower
yields resulted from continuing competitive pricing pressures in contract
renegotiations and declining cost indices.
Revenues from the transportation of Agricultural Commodities during the first
quarter of 1994 were $21 million less than the first quarter of 1993,
<PAGE>8
BURLINGTON NORTHERN INC. and SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
primarily as a result of a decline in volumes. This traffic decrease was
caused by numerous factors including adverse weather conditions that
constrained both Railroad and customer operations, and reduced crop
production. Corn and soybean revenues were less than prior year revenues by
$19 million and $9 million, respectively. These declines were primarily
volume related, and were mostly attributable to reduced crop production and
lower export demand. Flour/mill products and milo revenues also experienced
year-over-year decreases. Partially offsetting the decline in volumes was an
increase in yield, caused by traffic mix, price and length of haul, as well as
a $9 million improvement in barley revenues. The increase in barley revenues
was due to strong domestic demand, caused by favorable market conditions
during the first quarter of 1994.
Current quarter revenues for Minerals Processors improved by $4 million when
compared with the first quarter of 1993. Stronger clays and aggregates
traffic, primarily related to increased export demand for bentonite clay,
caused the majority of the increase in revenues for the quarter. Also, a rise
in construction activity boosted glass minerals and cement revenues.
First quarter revenues for Intermodal, Forest Products, Chemicals, Consumer
Products, Iron & Steel, Vehicles & Machinery and Aluminum, Nonferrous Metals &
Ores were relatively flat compared with the first quarter of 1993. Intermodal
revenues will reflect BN's decision to close two Intermodal hub centers in
Texas beginning with the second quarter.
Total current year revenues also benefited from a $19 million reduction in
shortlines and other. This decline was partially due to increased
miscellaneous revenue of $8 million, additional haulage agreement revenues and
a $6 million decrease in payments to shortline railroads caused by less BN
traffic on their lines.
Expenses
Total operating expenses for the first quarter of 1994 were $1,028 million
compared with expenses of $1,002 million for the same period in 1993. The
operating ratio was 85 percent, an improvement of 1 percentage point compared
with the first quarter of 1993, as increased revenues more than offset
increased operating expenses.
Compensation and benefits expenses were $6 million greater compared with the
first quarter of 1993. The combination of severe winter weather, the three
percent basic wage increase for union represented employees effective July
1993 and higher traffic volumes caused increased wages and related payroll
taxes. Increases in salaries and pension expense, due to a reduction in the
discount rate used in determining the projected benefit obligation, also
contributed to higher compensation and benefits expenses. These increases
were partially offset by a $7 million decrease caused by reduced crew sizes in
the Northern tier, decreases for cost of living allowances and decreases in an
annuity tax.
Fuel expenses for the quarter were $5 million lower compared with 1993
primarily due to a $7 million price variance. The average price paid for
diesel fuel decreased from 60.4 cents per gallon in the first quarter of 1993
<PAGE>9
BURLINGTON NORTHERN INC. and SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
to 55.5 cents per gallon in the first quarter of 1994 despite the 4.3 cents
per gallon increase in the federal fuel tax, effective October 1, 1993, as
part of the Omnibus Budget Reconciliation Act of 1993. These savings were
partially offset by increased consumption due to a higher traffic volume and
the severe weather experienced in January and February 1994. BN has a program
to hedge against fluctuations in the price of its diesel fuel purchases. This
program includes forward purchases for delivery at fueling facilities and
petroleum futures contracts.
Materials expenses for the first quarter of 1994 increased $5 million compared
with 1993, primarily due to higher locomotive and track materials costs which
partially resulted from the severe winter weather. Repairs for locomotives
increased due to weather-induced equipment failures, a larger fleet size in
1994 and a demand for locomotive power necessitating a higher in-service
status for the fleet.
Equipment rents expenses were $10 million higher than the first quarter of
1993 principally due to an increase in car-hire expenses of $6 million.
Expanded automotive traffic increased rentals of flat cars and autoracks, and
strong chemicals shipments increased rentals of tank cars. Decreased train
velocity caused by severe weather operating conditions also resulted in higher
car-hire expenses. Higher costs were further attributable to a larger leased
covered hopper fleet size and increased lease rates as well as the leasing of
locomotives to meet power requirements.
Purchased services for the quarter increased $12 million from the first
quarter of 1993. The most significant contributing factors were higher
intermodal and automotive traffic related costs and third party locomotive
maintenance and repairs costs. These increases were partially offset by
haulage agreement related payments from the Atchison, Topeka and Santa Fe
Railroad (ATSF) for services provided by BN to ATSF.
Depreciation expense for the first three months of 1994 was slightly higher
than the same period in 1993.
Other operating expenses were $3 million lower compared with the first quarter
of 1993. An $11 million decrease in costs associated with personal injury
claims was substantially offset by increases in derailment-related expenses
and property taxes.
Interest expense for the quarter increased $6 million compared with the first
quarter in 1993, due to a higher average outstanding debt balance in 1994 and
a favorable court ruling in 1993 which reduced interest expense for the 1993
period.
Other expense, net was $2 million lower in the first quarter of 1994 compared
with the same period in 1993. This resulted primarily from the net gain on
property dispositions occurring in the first quarter of 1994.
The effective tax rate was 38.7 percent for 1994 compared with 37.6 percent
for the first quarter of 1993. This increase resulted primarily from the 1
percent increase in the corporate federal income tax rate as a part of the
Omnibus Budget Reconciliation Act of 1993.
<PAGE>10
BURLINGTON NORTHERN INC. and SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Other matters
Under the requirements of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (Superfund) and certain other laws, BN
is potentially liable for the cost of clean-up of various contaminated sites
identified by the U.S. Environmental Protection Agency and other agencies. BN
has been notified that it is a potentially responsible party (PRP) for study
and clean-up costs at a number of sites and, in many instances, is one of
several PRPs. BN generally participates in the clean-up of these sites
through cost-sharing agreements with terms that vary from site to site. Costs
are typically allocated based on relative volumetric contribution of material,
the amount of time the site was owned or operated, and/or the portion of the
total site owned or operated by each PRP. However, under Superfund and
certain other laws, as a PRP, BN can be held jointly and severally liable for
all environmental costs associated with a site.
Environmental costs include initial site surveys and environmental studies of
potentially contaminated sites as well as costs for remediation and
restoration of sites determined to be contaminated. Liabilities for
environmental clean-up costs are initially recorded when BN's liability for
environmental clean-up is both probable and a reasonable estimate of
associated costs can be made. Adjustments to initial estimates are recorded
as necessary based upon additional information developed in subsequent
periods. BN conducts an ongoing environmental contingency analysis, which
considers a combination of factors, including independent consulting reports,
site visits, legal reviews, analysis of the likelihood of participation in and
ability to pay for clean-up by other PRPs, and historical trend analysis.
BN is involved in a number of administrative and judicial proceedings in which
it is being asked to participate in the clean-up of sites contaminated by
material discharged into the environment. BN paid approximately $5 million
during the three months ended March 31, 1994 relating to mandatory clean-up
efforts, including amounts expended under federal and state voluntary clean-up
programs. At this time, BN expects to spend approximately $120 million in
future years to remediate and restore these sites.
Liabilities for environmental costs represent BN's best estimates for
remediation and restoration of these sites and include asserted and unasserted
claims. BN's best estimate of unasserted claims was approximately $5 million
as of March 31, 1994. Although recorded liabilities include BN's best
estimates of all costs, without reduction for anticipated recovery from
insurance, BN's total clean-up costs at these sites cannot be predicted with
certainty due to various factors such as the extent of corrective actions that
may be required, evolving environmental laws and regulations, advances in
environmental technology, the extent of other PRPs participation in clean-up
efforts, developments in ongoing environmental analyses related to sites
determined to be contaminated, and developments in environmental surveys and
studies of potentially contaminated sites. As a result, charges to income for
environmental liabilities could possibly have a significant effect on results
of operations in a particular quarter or fiscal year as individual site
studies and remediation and restoration efforts proceed or as new sites
arise. However, expenditures associated with such liabilities are typically
<PAGE>11
BURLINGTON NORTHERN INC. and SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
paid out over a long period, in some cases up to 40 years, and are therefore
not expected to have a material adverse effect on BN's consolidated financial
position, cash flow or liquidity.
<PAGE>12
BURLINGTON NORTHERN INC. and SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Wheat and Barley Transportation Rates
In September 1980 a class action lawsuit was filed against Railroad in United
States District Court for the District of Montana ("District Court")
challenging the reasonableness of Railroad's export wheat and barley rates.
The class consists of Montana grain producers and elevators. The plaintiffs
sought a finding that Railroad's single car export wheat and barley rates for
shipments moving from Montana to the Pacific Northwest were unreasonably high
and requested damages in the amount of $64 million. In March 1981 the District
Court referred the rate reasonableness issue to the Interstate Commerce
Commission ("ICC"). Subsequently, the State of Montana filed a complaint at
the ICC challenging Railroad's multiple car rates for Montana wheat and barley
movements occurring after October 1, 1980.
The ICC issued a series of decisions in this case from 1988 to 1991. Under
these decisions, the ICC applied a revenue to variable cost test to the rates
and determined that Railroad owed $9,685,918 in reparations plus interest. In
its last decision, dated November 26, 1991, the ICC found Railroad's total
reparations exposure to be $16,559,012 through July 1, 1991. The ICC also
found that Railroad's current rates were below a reasonable maximum and vacated
its earlier rate prescription order.
Railroad appealed to the United States Court of Appeals for the District of
Columbia Circuit ("D.C. Circuit") those portions of the ICC's decisions
concerning the post-October 1, 1980 rate levels. Railroad's primary contention
on appeal was that the ICC erred in using the revenue to variable cost rate
standard to judge the rates instead of Constrained Market Pricing/Stand Alone
Cost principles. The limited portions of decisions that cover pre-October 1,
1980 rates were appealed to the Montana District Court.
On March 24, 1992, the Montana District Court dismissed plaintiffs' case as to
all aspects other than those relating to pre-October 1, 1980 rates. On
February 9, 1993, the D.C. Circuit served its decision regarding the appeal of
the several ICC decisions in this case. The Court held that the ICC did not
adequately justify its use of the revenue to variable cost standard as Railroad
had argued and remanded the case to the ICC for further administrative
proceedings.
On July 22, 1993, the ICC served an order in response to the D.C. Circuits'
February 9, 1993 decision. In its order, the ICC stated it would use the
Constrained Market Pricing/Stand Alone Cost Standards in assessing the
reasonableness of BN wheat and barley rates moving from Montana to Pacific
Coast ports from 1978 forward. The ICC assigned the case to the Office of
Hearings to develop a procedural schedule. The parties are now engaged in
discovery.
<PAGE>13
BURLINGTON NORTHERN INC. and SUBSIDIARIES
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The date of the annual meeting was April 21, 1994.
(b) Not required.
(c) The following matters were voted on at the meeting:
(1) The following persons were nominated and elected to serve as
directors of BNI:
Affirmative Votes Absten- Broker
Name Votes Withheld tions Nonvotes
J. S. Blanton 78,804,771 345,743 None. None.
D. P. Davison 78,789,662 360,852 " "
D. J. Evans 78,755,757 394,757 " "
G. Grinstein 78,807,328 343,186 " "
B. C. Jordan 78,783,810 366,704 " "
B. F. Love 78,791,623 358,891 " "
A. R. Weber 78,814,835 335,679 " "
E. E. Whitacre, Jr. 78,829,771 320,743 " "
M. B. Yanney 78,814,671 335,843 " "
(2) The Burlington Northern Inc. Senior Executive Performance
Incentive Plan pursuant to which certain senior executive
officers would be eligible to receive annual bonuses upon the
satisfaction of certain performance criteria was voted on and
adopted.
Affirmative Votes Absten- Broker
Votes Withheld tions Nonvotes
64,026,788 13,728,311 1,395,415 None.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
The following exhibits are filed as part of this report:
Designation Nature of Exhibit
4 BN has either previously filed with the
Securities and Exchange Commission or upon
request will furnish a copy of any
instrument with respect to long-term debt
of BN.
11 Computation of earnings per common share.
12 Computation of ratio of earnings to fixed
charges.
B. Reports on Form 8-K
During the quarter covered by this report there were no reports on
Form 8-K filed.
Items 2, 3 and 5 of Part II were not applicable and have been omitted.
<PAGE>14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BURLINGTON NORTHERN INC.
(Registrant)
By: David C. Anderson
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
Date: May 2, 1994
<PAGE>15
BURLINGTON NORTHERN INC. and SUBSIDIARIES
Exhibit Index
Exhibit Page
Number Description Number
11 Computation of earnings per 16
common share
12 Computation of ratio of 17
earnings to fixed charges
EXHIBIT 11
BURLINGTON NORTHERN INC. and SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars In Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
1994 1993
Net income
Primary:
Net income.......................................... $ 77 $ 82
Convertible and mandatory redeemable preferred stock
dividends......................................... (5) (5)
$ 72 $ 77
Fully diluted:
Net income available for common shareholders........ $ 72 $ 77
Dividends on convertible preferred stock, assuming
conversion........................................ 5 5
$ 77 $ 82
Weighted average number of shares
Primary:
Average common shares outstanding................... 88.9 88.1
Common share equivalents resulting from assumed
exercise of stock options......................... 1.4 1.0
90.3 89.1
Fully diluted:
Average common shares outstanding................... 88.9 88.1
Common shares resulting from assumed conversion of
convertible preferred stock....................... 7.4 7.4
Common share equivalents resulting from assumed
exercise of stock options assuming full dilution.. 1.3 1.2
97.6 96.7
Earnings per common share:
Primary............................................... $ .79 $ .86
Fully diluted......................................... $ .79 $ .85
Primary earnings per common share are computed by dividing net income, after
deduction of preferred stock dividends, by the weighted average number of
common shares and common share equivalents outstanding. Common share
equivalents are computed using the treasury stock method. Under the treasury
stock method, an average market price is used to determine the number of
common share equivalents for primary earnings per common share. The higher of
the average or end of period market price is used to determine common share
equivalents for fully diluted earnings per common share. In addition, the
if-converted method is used for convertible preferred stock when computing
fully diluted earnings per common share. No redeemable preferred stock was
outstanding during 1994 and the redeemable preferred stock dividends for the
three months ended March 31, 1993 were not significant.
Earnings per common share may not compute due to the level of rounding in this
exhibit.
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EXHIBIT 12
BURLINGTON NORTHERN INC. and SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Millions, Except Ratio Amounts)
(Unaudited)
Three Months Ended
March 31,
1994 1993
Earnings:
Pre-tax income..................................... $142 $132
Add:
Interest and fixed charges, excluding capitalized
interest....................................... 39 33
Portion of rent under long-term operating leases
representative of an interest factor........... 25 25
Total earnings available for fixed charges......... $206 $190
Fixed charges:
Interest and fixed charges......................... $ 39 $ 33
Portion of rent under long-term operating leases
representative of an interest factor............. 25 25
Total fixed charges................................ $ 64 $ 58
Ratio of earnings to fixed charges................... 3.22x 3.28x
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